If an industry's demand conditions allow at most one firm to cover its costs while producing at its minimum efficient scale (MES),this situation is known as

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This situation is known as a natural monopoly, where the demand conditions allow only one firm to operate at its minimum efficient scale (MES). This occurs when the fixed costs of production are high relative to the variable costs, and it is more efficient and cost-effective for one firm to produce the entire output necessary to satisfy demand. Due to the high fixed costs, it is difficult for new firms to enter the market and compete, resulting in limited competition.

If an Industry's Demand Conditions Allow at Most One Firm